Company Raises Fiscal 2007 Diluted Earnings Per Share Expectations
to $2.45 to $2.60
VALLEY FORGE, Pa.--(BUSINESS WIRE)--Jan. 24,
2007--AmerisourceBergen Corporation (NYSE:ABC) today reported results
for its fiscal first quarter ended December 31, 2006. The following
results are presented in accordance with U.S. generally accepted
accounting principles (GAAP).
Fiscal First Quarter Highlights
- Diluted earnings per share from continuing operations of
$0.63, including $0.02 of net special charges, up 34 percent.
- Record operating revenue of $15.7 billion, up 16 percent.
- Pharmaceutical Distribution operating margin of 1.25 percent,
up 21 basis points.
- Capital deployment: $330 million in share repurchases, $144
million in acquisitions, dividend doubled.
"The December quarter's excellent performance exceeded our
expectations and provides strong momentum for the remainder of fiscal
2007," said R. David Yost, AmerisourceBergen's Chief Executive
Officer. "Operating revenue was a record $15.7 billion, and our
outstanding earnings per share results were driven by strong
performance in our traditional distribution business as well as the
continued strength of our specialty distribution business. We enhanced
shareholder value by repurchasing a significant amount of our stock
and doubling our dividend. Our balance sheet remains strong, and we
continue to have excellent financial flexibility."
Discussion of Results
AmerisourceBergen's operating revenue was a record $15.7 billion
in the first quarter of fiscal 2007 compared to $13.5 billion for the
same period last year, a 16 percent increase. Bulk deliveries in the
quarter decreased 8 percent to $1.0 billion from $1.1 billion in last
fiscal year's first quarter.
Consolidated operating income in the quarter increased 25 percent
to $208.9 million, primarily due to an improved gross margin and
productivity gains in the Pharmaceutical Distribution segment. In
addition, $6.0 million of charges for facility consolidations,
employee severance, and other costs, primarily related to costs of the
spin off of PharMerica Long Term Care, and a $1.9 million gain from
drug manufacturer antitrust litigation settlements, resulted in a net
$4.1 million negative impact on consolidated operating income in the
fiscal 2007 first quarter. The previous fiscal year's first quarter
operating income included an $18.0 million gain from antitrust
litigation cases and charges for facility consolidations, employee
severance, and other costs primarily related to the outsourcing of
information technology activities of $8.8 million, for a net positive
impact of $9.2 million.
The effective tax rate for the first quarter of fiscal 2007 was
39.1 percent compared to 38.5 percent in the same period last year.
Diluted earnings per share from continuing operations were $0.63
in the first quarter of fiscal 2007, compared to $0.47, in the
previous fiscal year's first quarter. The net per share impact of the
gain from the antitrust litigation settlements and the charges from
facility consolidations, employee severance and other costs, including
rounding, was a negative $0.02 in first quarter of fiscal 2007. In the
first quarter of fiscal 2006, the net per share impact of the gain
from antitrust litigation settlements and the charges from facility
consolidations, employee severance, and other costs, was a positive
$0.03.
Average diluted shares outstanding for the first quarter of fiscal
2007 were 195.0 million, down from 210.3 million shares in the prior
fiscal year's first quarter, due to share repurchases by the Company.
"In the first quarter of fiscal 2007, outstanding operating
results were driven by stronger than expected performance in our
distribution businesses supported by our expanding service offerings,"
said Kurt J. Hilzinger, AmerisourceBergen's President and Chief
Operating Officer.
"Our Specialty Group, which focuses on the distribution of
specialty pharmaceuticals to physicians and the services to support
that market, delivered 40 percent operating revenue growth - nearly
half of the 16 percent increase in the Pharmaceutical Distribution
segment - driven primarily by its large oncology distribution business
and newer physician administered products in its other distribution
businesses. The Group's service businesses expanded with the addition
of two acquisitions: IgG of America, a specialty pharmacy and infusion
services business specializing in the blood derivative IVIG, and
Access M.D., a Canadian provider of support services to manufacturers
and providers of injectable and biological therapies.
"In the Drug Corporation, which provides pharmaceutical
distribution and related services to pharmacies, operating revenue
grew above overall pharmaceutical market growth and across all of its
customer markets. The positive impact of generic drugs, the
contribution of fee-for-service, and the benefits from Optimiz(R), our
productivity program, were drivers of the significant improvement in
operating margin. PRxO(R) Generics, our generic formulary program,
grew faster than the overall generic market in the first quarter of
fiscal 2007.
"Over the remainder of the fiscal year, we expect operating
revenue growth in the Drug Corporation to moderate to market growth
levels primarily due to the decision not to renew a contract with a
large, low-margin customer and the anniversary of our prior year
Canadian acquisitions, which contributed nearly 1.5 percent to
operating revenue growth in the first quarter of fiscal 2007.
"The Packaging Group delivered a solid quarter, meeting both
internal revenue and operating margin expectations, while achieving a
record amount of new business awards.
"Our PharMerica segment increased revenue 6.5 percent in the
fiscal 2007 first quarter driven by a 7 percent increase in the
institutional pharmacy business. PMSI, our workers' compensation
business, acquired Health Advocates, a leading provider of Medicare
set-aside services, in the quarter to broaden its service offerings,"
said Hilzinger.
Segment Review
AmerisourceBergen operates in two segments: Pharmaceutical
Distribution (which includes the operations of AmerisourceBergen Drug
Corporation, Specialty Group, and Packaging Group) and PharMerica
(which includes the PharMerica Long Term Care institutional pharmacy
business and PMSI, the workers' compensation business). Intersegment
sales of $232.5 million in the first quarter of fiscal 2007 from
AmerisourceBergen Drug Corporation to PharMerica, which are included
in the Pharmaceutical Distribution segment operating revenue, are
eliminated for consolidated reporting purposes.
Pharmaceutical Distribution Segment
Operating revenue in the Pharmaceutical Distribution segment was
$15.5 billion in the first quarter of fiscal 2007, an increase of 16
percent over the $13.3 billion of operating revenue in the same
quarter of the previous fiscal year. Strong growth in the Specialty
Group and Drug Corporation drove operating revenues above the
Company's expectations in the quarter.
Pharmaceutical Distribution customer mix in the first quarter of
fiscal 2007 was 60 percent institutional and 40 percent retail.
For the segment, gross profit as a percentage of operating revenue
in the first quarter of fiscal 2007 was 3.03 percent, a 6 basis point
improvement over the 2.97 percent in the same period last fiscal year,
due primarily to the positive impact of fee-for-service agreements and
generic drugs.
Total expenses as a percentage of operating revenue in the fiscal
2007 first quarter were 1.78 percent, down 15 basis points from 1.93
in the same quarter of the previous fiscal year, reflecting economies
of scale.
Segment operating income for the first quarter of fiscal 2007 was
$194.1 million, a 40 percent increase over the previous fiscal year's
first quarter, and as a percentage of operating revenue, was 1.25
percent, a 21 basis point improvement from the first quarter of fiscal
2006.
PharMerica
PharMerica's operating revenue for the first quarter of fiscal
2007 was $436 million, compared with $409 million in the previous
year's first quarter, up 6.5 percent. In the first quarter of fiscal
2007, PharMerica Long Term Care (LTC), operating revenues were $318
million and PMSI operating revenues were $118 million. Operating
income for the first quarter of fiscal 2007 was $18.9 million, up
slightly from the same quarter last fiscal year, with LTC contributing
$9.1 million and PMSI contributing $9.8 million. Due primarily to the
cost of acquiring and integrating Health Advocates and the
infrastructure investments in PMSI, expenses increased in the quarter,
and operating income as a percentage of revenue was 4.3 percent in the
first quarter of fiscal 2007 down slightly from the 4.5 percent in
last year's first quarter.
Looking Ahead
"With the momentum from a stronger than expected first quarter, we
are raising our expectations for fiscal year 2007 diluted earnings per
share to a range of $2.45 to $2.60 from the previous range of $2.40 to
$2.55," said Yost. "The PharMerica Long Term Care business, which the
Company currently expects to spin off on a tax-free basis to our
shareholders by the end of March 2007, continues to represent $0.09 to
$0.11 of our earnings expectations for all of fiscal year 2007.
"Our diluted earnings per share guidance for fiscal 2007 is based
on the following assumptions: Operating revenue growth of 9 percent to
11 percent, raised earlier this month from a range of 7 percent to 9
percent; operating margin expansion in the Pharmaceutical Distribution
segment; and free cash flow in the range of $425 million to $500
million, which includes capital expenditures in the $100 million to
$125 million range. The Company also anticipates spending $450 million
to $500 million to repurchase its common shares during fiscal year
2007."
Conference Call
The Company will host a conference call to discuss its results at
11:00 a.m. Eastern Standard Time on January 24, 2007. Participating in
the conference call will be: R. David Yost, Chief Executive Officer;
Kurt J. Hilzinger, President and Chief Operating Officer; and Michael
D. DiCandilo, Executive Vice President and Chief Financial Officer.
To access the live conference call via telephone:
Dial in: (612) 332-0226, no access code required.
To access the live webcast:
Go to the Quarterly Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.
A replay of the telephone call and webcast will be available from 2:30
p.m. January 24, 2007 until 11:59 p.m. January 31, 2007. The Webcast
replay will be available for 30 days.
To access the replay via telephone:
Dial in: 800-475-6701 from within the U.S., access code: 857491
(320) 365-3844 from outside the U.S., access code: 857491
To access the archived webcast:
Go to the Quarterly Webcasts section on the Investor Relations page at
http://www.amerisourcebergen.com.
About AmerisourceBergen
AmerisourceBergen (NYSE:ABC) is one of the world's largest
pharmaceutical services companies serving the United States, Canada
and selected global markets. Servicing both pharmaceutical
manufacturers and healthcare providers in the pharmaceutical supply
channel, the Company provides drug distribution and related services
designed to reduce costs and improve patient outcomes.
AmerisourceBergen's service solutions range from pharmacy automation
and pharmaceutical packaging to pharmacy services for skilled nursing
and assisted living facilities, reimbursement and pharmaceutical
consulting services, and physician education. With more than $61
billion in annual revenue, AmerisourceBergen is headquartered in
Valley Forge, PA, and employs more than 13,000 people.
AmerisourceBergen is ranked #27 on the Fortune 500 list. For more
information, go to www.amerisourcebergen.com.
Forward-Looking Statements
This news release may contain certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. These statements
are based on management's current expectations and are subject to
uncertainty and changes in circumstances. Actual results may vary
materially from the expectations contained in the forward-looking
statements. The following factors, among others, could cause actual
results to differ materially from those described in any
forward-looking statements: competitive pressures; the loss of one or
more key customer or supplier relationships; customer defaults or
insolvencies; changes in customer mix; supplier defaults or
insolvencies; changes in pharmaceutical manufacturers' pricing and
distribution policies or practices; adverse resolution of any contract
or other disputes with customers (including departments and agencies
of the U.S. Government) or suppliers; regulatory changes (including
increased government regulation of the pharmaceutical supply channel);
changes in U.S. government policies (including reimbursement changes
arising from federal legislation, including the Medicare Modernization
Act and the Deficit Reduction Act of 2005); price inflation in branded
pharmaceuticals and price deflation in generics; declines in the
amounts of market share rebates offered by pharmaceutical
manufacturers to the PharMerica Long-Term Care business, declines in
the amounts of rebates that the PharMerica Long-Term Care business can
retain, and/or the inability of the business to offset the rebate
reductions that have already occurred or any rebate reductions that
may occur in the future; any disruption to or other adverse effects
upon the PharMerica Long-Term Care business caused by the announcement
of the Company's agreement to combine the PharMerica Long-Term Care
business with the institutional pharmacy business of Kindred
Healthcare, Inc. into a new public company that will be owned 50% by
the Company's shareholders (the "PharMerica LTC Transaction"); the
inability of the Company to successfully complete the PharMerica LTC
Transaction; fluctuations in market interest rates; operational or
control issues arising from the Company's outsourcing of information
technology activities; success of integration, restructuring or
systems initiatives; fluctuations in the U.S. dollar - Canadian dollar
exchange rate and other foreign exchange rates; economic, business,
competitive and/or regulatory developments in Canada, the United
Kingdom and elsewhere outside of the United States; acquisition of
businesses that do not perform as we expect or that are difficult for
us to integrate or control; changes in tax legislation or adverse
resolution of challenges to our tax positions; and other economic,
business, competitive, legal, tax, regulatory and/or operational
factors affecting the business of the Company generally. Certain
additional factors that management believes could cause actual
outcomes and results to differ materially from those described in
forward-looking statements are set forth (i) in Item 1A (Risk Factors)
in the Company's Annual Report on Form 10-K for the fiscal year ended
September 30, 2006 and elsewhere in that report and (ii) in other
reports filed by the Company pursuant to the Securities Exchange Act
of 1934.
AMERISOURCEBERGEN CORPORATION
FINANCIAL SUMMARY
(In thousands, except per share data)
(unaudited)
Three Three
Months Ended % of Months Ended % of
December 31, Operating December 31, Operating %
2006 Revenue 2005 Revenue Change
------------ --------- ------------ --------- ------
Revenue:
Operating
revenue $15,696,539 100.00% $13,535,854 100.00% 16%
Bulk deliveries
to customer
warehouses 1,028,854 1,117,293 -8%
------------ ------------
Total revenue 16,725,393 14,653,147 14%
Cost of goods sold 16,130,750 14,124,769 14%
------------ ------------
Gross profit 594,643 3.79% 528,378 3.90% 13%
Operating
expenses:
Distribution,
selling and
administrative 356,961 2.27% 331,859 2.45% 8%
Depreciation and
amortization 22,800 0.15% 21,087 0.16% 8%
Facility
consolidations,
employee
severance, and
other 6,023 0.04% 8,827 0.07% -32%
------------ ------------
Operating income 208,859 1.33% 166,605 1.23% 25%
Other loss 66 0.00% 783 0.01% -92%
Interest expense,
net 8,143 0.05% 6,512 0.05% 25%
------------ ------------
Income from
continuing
operations before
income taxes 200,650 1.28% 159,310 1.18% 26%
Income taxes 78,463 0.50% 61,334 0.45% 28%
------------ ------------
Income from
continuing
operations 122,187 0.78% 97,976 0.72% 25%
Loss from
discontinued
operations, net
of tax - 709
------------ ------------
Net income $122,187 0.78% $97,267 0.72% 26%
============ ============
Earnings per
share:
Basic
Continuing
operations $0.64 $0.47 36%
Discontinued
operations - -
------------ ------------
Net income $0.64 $0.47 36%
============ ============
Diluted
Continuing
operations $0.63 $0.47 34%
Discontinued
operations - -
Rounding - (0.01)
------------ ------------
Net income $0.63 $0.46 37%
============ ============
Weighted average
common shares
outstanding:
Basic 192,391 208,250
Diluted 194,970 210,349
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
ASSETS
December 31, September 30,
2006 2006
------------- --------------
Current assets:
Cash and cash equivalents $798,389 $1,261,268
Short-term investment securities
available-for-sale 445,653 67,840
Accounts receivable, net 3,422,833 3,427,139
Merchandise inventories 4,628,473 4,422,055
Prepaid expenses and other 36,533 32,105
------------- --------------
Total current assets 9,331,881 9,210,407
Property and equipment, net 518,684 509,746
Other long-term assets 3,192,353 3,063,767
------------- --------------
Total assets $13,042,918 $12,783,920
============= ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $6,766,052 $6,499,264
Current portion of long-term debt 1,155 1,560
Other current liabilities 1,020,115 958,364
------------- --------------
Total current liabilities 7,787,322 7,459,188
Long-term debt, less current portion 1,210,938 1,093,931
Other long-term liabilities 105,387 89,644
Stockholders' equity 3,939,271 4,141,157
------------- --------------
Total liabilities and stockholders'
equity $13,042,918 $12,783,920
============= ==============
AMERISOURCEBERGEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Three
Months Ended Months Ended
December 31, December 31,
2006 2005
------------ -------------
Operating Activities:
Net income $122,187 $97,267
Adjustments to reconcile net income to
net cash provided by
operating activities 56,583 52,221
Changes in operating assets and
liabilities 109,101 81,019
------------ -------------
Net cash provided by operating activities 287,871 230,507
------------ -------------
Investing Activities:
Capital expenditures (28,135) (27,913)
Cost of acquired companies, net of cash
acquired (143,543) (81,119)
Proceeds from sales of property and
equipment 1,980 1,868
Proceeds from sale-leaseback transactions - 28,143
Net short-term investment activity (377,813) (360,492)
------------ -------------
Net cash used in investing activities (547,511) (439,513)
------------ -------------
Financing Activities:
Net borrowings 121,816 99,739
Deferred financing costs and other (1,605) (295)
Purchases of common stock (325,632) (88,922)
Exercise of stock options 11,841 33,607
Cash dividends on common stock (9,659) (5,210)
------------ -------------
Net cash (used in) provided by financing
activities (203,239) 38,919
------------ -------------
Decrease in cash and cash equivalents (462,879) (170,087)
Cash and cash equivalents at beginning of
period 1,261,268 966,553
------------ -------------
Cash and cash equivalents at end of period $798,389 $796,466
============ =============
AMERISOURCEBERGEN CORPORATION
SUMMARY SEGMENT INFORMATION
(dollars in thousands)
(unaudited)
Three Months Ended December 31,
-----------------------------------
Operating Revenue 2006 2005 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $15,493,123 $13,348,153 16%
PharMerica 435,885 409,258 7%
Intersegment eliminations (232,469) (221,557) -5%
------------ ------------
Operating revenue $15,696,539 $13,535,854 16%
============ ============
Three Months Ended December 31,
-----------------------------------
Operating Income 2006 2005 % Change
---------------------------------- -----------------------------------
Pharmaceutical Distribution $194,133 $138,876 40%
PharMerica 18,859 18,507 2%
Facility consolidations, employee
severance, and other (6,023) (8,827) 32%
Gain on antitrust litigation
settlements 1,890 18,049 -90%
------------ ------------
Operating income $208,859 $166,605 25%
============ ============
Percentages of operating revenue:
Pharmaceutical Distribution
Gross profit 3.03% 2.97%
Operating expenses 1.78% 1.93%
Operating income 1.25% 1.04%
PharMerica
Gross profit 28.17% 27.80%
Operating expenses 23.85% 23.27%
Operating income 4.33% 4.52%
AmerisourceBergen Corporation
Gross profit 3.79% 3.90%
Operating expenses 2.46% 2.67%
Operating income 1.33% 1.23%
AMERISOURCEBERGEN CORPORATION
EARNINGS PER SHARE
(In thousands, except per share data)
(unaudited)
Basic earnings per share is computed on the basis of the weighted
average number of shares of common stock outstanding during the
periods presented. Diluted earnings per share is computed on the
basis of the weighted average number of shares of common stock
outstanding during the period plus the dilutive effect of stock
options and restricted stock.
Three Months Ended
December 31,
2006 2005
---------- ----------
Income from continuing operations $122,187 $97,976
========== ==========
Weighted average common shares outstanding -
basic 192,391 208,250
Effect of dilutive securities - stock options and
restricted stock 2,579 2,099
---------- ----------
Weighted average common shares outstanding -
diluted 194,970 210,349
========== ==========
Earnings per share:
Basic
Continuing operations $0.64 $0.47
Discontinued operations - -
---------- ----------
Net income $0.64 $0.47
========== ==========
Diluted
Continuing operations $0.63 $0.47
Discontinued operations - -
Rounding - (0.01)
---------- ----------
Net income $0.63 $0.46
========== ==========
CONTACT: AmerisourceBergen Corporation
Michael N. Kilpatric, 610-727-7118
mkilpatric@amerisourcebergen.com
SOURCE: AmerisourceBergen Corporation